Signs of a Possible Defense in SAC Case

The government’s insider trading case against a former portfolio manager at SAC Capital Advisors centers on a trade involving Steven A. Cohen, the hedge fund’s billionaire founder. But new details cast doubt on how authorities have portrayed the trade, “suggesting a possible line of defense for the portfolio manager and raising questions about whether the government will be able to build a case against Mr. Cohen,” DealBook’s Andrew Ross Sorkin and Peter Lattman report.

Prosecutors have claimed that SAC sold shares of two pharmaceutical companies and also bet against those stocks after the former employee, Mathew Martoma, received secret information about problems with a new Alzheimer’s drug. But SAC may not have been in a position to profit on the bad news. “Internal SAC trading records, according to people directly involved in the case, indicate that the hedge fund did not have a negative bet in place in advance of the announcement of the drug trial’s disappointing results. Instead, the records indicated that SAC, through a series of trades, including a complex transaction known as an equity swap, had virtually no exposure â€" neither long nor short â€" heading into the disclosure of the drug data.”

“The trading records may complicate a government effort to pursue a case against Mr. Cohen,” Mr. Sorkin and Mr. Lattman write. In addition, “several other factors could make it difficult for the government to implicate Mr. Cohen. SAC is well known for its aggressive, rapid-fire trading style, and several former employees say that there is nothing unusual about the fund’s exiting a large position over just a few days.” Still, the government does have powerful evidence against Mr. Martoma; prosecutors have secured the testimony of the doctor who says he leaked drug trial information to the former portfolio man! ager.

CARRIED INTEREST ON OBAMA’S RADAR  |  The tax treatment of private equity managers’ profits, known as carried interest, was not directly addressed in the recent budget agreement in Washington. But President Obama is ready to revive the issue. In an interview with CBS News on Sunday, the president mentioned carried interest, which is taxed as capital gains, in a discussion on the budget deficit. “The average person doesn’t have access to Cayman Island accounts. The average person doesn’t have access to carried interest income, where they end up paying a much lower rate on billions of dollars that they’ve earned,” Mr. Obama said. “We just want to make sure that the whole system is fair.”

SMARTPHONE WARS AT THE SUPERBOWL  |  Of all the commercials during the Super Bowl on Sunday night, DealBook took special notice of new spots from BlackBerry and Samsung, in which both firms tried to assert their might in the smartphone market. The ad for BlackBerry, which unveiled its new product line last week, tried to emphasize the multitude of features on the new devices by showing a man having fantastical experiences, like growing elephant legs. “In 30 seconds, it’s quicker to show you what it can’t do,” the voice-over said. And with Apple’s iPhones enjoying an aura of cool, Samsung tried to show its own pop cultural savvy with a meta-commercial featuring celebrity endorsers. The company notably lacking a splashy ad Apple.

! ON THE AGENDA  |  Jamie Dimon of JPMorgan Chase addresses the Greater Miami Chamber of Commerce at noon. Data on factory orders for December is out at 10 a.m. Yum Brands reports earnings after the market closes. The Carlyle Group starts an audio podcast series, with the co-founder Bill Conway discussing the outlook for 2013.

NEW QUESTIONS OVER A BANK OF AMERICA SETTLEMENT  |  Bank of America freely acknowledges that its acquisition of Countrywide was disastrous. “But according to new documents filed in state Supreme Court in Manhattan late on Friday, questionable practices by the bank’s loan servicing unit have continued well after the Countrywide acquisition; they paint a picture of a bank that continued to put its own interests ahead of investors as i modified troubled mortgages,” The New York Times reports. “The documents were submitted by three Federal Home Loan Banks, in Boston, Chicago and Indianapolis, and Triaxx, an investment vehicle that bought mortgage securities. They contend that a proposed $8.5 billion settlement that Bank of America struck in 2011 to resolve claims over Countrywide’s mortgage abuses is far too low and shortchanges thousands of ordinary investors. The filing raises new questions about whether a judge will approve the settlement. If it is denied, the bank would face steeper legal obligations.”

Mergers & Acquisitions Â'

Blackstone T! akes Cont! rol of 2 Maldivian Seaplane Operators  |  The Blackstone Group said on Sunday that it would buy controlling stakes in two seaplane companies in the Maldives: Maldivian Air Taxi and Trans Maldivian Airways. DealBook Â'

Black Cabs of London Get a Bailout From China  |  The Zhejiang Geely Holding Group said that it had agreed to pay $17 million for the assets of Manganese Bronze, whose London Taxi Company unit produces black taxis. DealBook Â

R.B.S. Said to Plan I.P.O. of Bank Branches  |  “The Royal Bank of Scotland plans to float the 316 branches it failed to sell to Santander after a lack of strong interest from trade bidders,” The Telegraph reports, without citing sources.
TELEGRAPH

Avon’s New Turnaround Plan Is Met With Anxiety  |  Sherilyn S. McCoy, the successor to Andrea Jung at Avon Products, “is hurrying to clean up the mess and win back investors’ trust. It won’t be easy,” The New York Times writes. ! NEW YORK ! TIMES

Heineken Said to Prepare to Sell Hartwall Unit  | 
REUTERS

INVESTMENT BANKING Â'

2 Top Officers at Barclays to Step Down  |  Barclays says its chief financial officer and its general counsel are leaving, the latest in a wave of departures at the British banking giant. DealBook Â'

Citigroup Names Senior Banker in Europe  |  Luigi de Vecchi has been apponted chairman of corporate and investment banking for continental Europe at Citigroup, the bank announced on Monday. DealBook Â'

Capital One Picks Banker as Its Chief of Finance  |  Capital One Financial has hired Stephen S. Crawford, a top executive of the boutique investment bank Centerview Partners, as its chief financial officer. DealBook Â'

Credit Agricole Completes Sale of Greek Bank  | 
REUTERS

PRIVATE EQUITY Â'

Blackstone Gets an Underwriting License  |  The Financial Times reports: “Blackstone, one of the world’s largest alternative asset managers, has quietly secured a securities underwriting license as its expanding capital markets operation strays into investment banking territory.” FINANCIAL TIMES

Buyouts Raise Concerns Among Bond Investors  |  The Wall Street Journal reports: “With buyouts back in vogue, fund managers specializing in highly rated, or investment-grade, bonds have been scrambling to avoid companies that might fall prey to private equity.” WALL STREET JOURNAL

Talks for Dell Buyout Continue  |  The Wall Street Journal reports: “Talks for a potential buyout of Dell Inc. continued Sunday evening, as people involved in the negotiations aimed to finalize a deal within days, according to people familiar with the discussions.” WALL STREET JOURNAL

Permira and K.K.R. Said to Consider Selling Stake in German Broadcaster  |  The buyout firms have tapped JPMorgan Chase to consider options for their controlling stake in ProSiebenSat.1 Media, Bloomberg News reports, citing an uniden! tified pe! rson with knowledge of the matter. BLOOMBERG NEWS

HEDGE FUNDS Â'

Herbalife in the Government’s Sights  |  As the Federal Trade Commission released complaints against Herbalife, the agency made reference to a “law enforcement investigation” and a “pending law enforcement action,” The New York Post reports. NEW YORK POST

Third Point Sells Some Yahoo Shares  |  “Third Point said in a statement on Friday that it sold the shares bcause it wanted to maintain a roughly consistent percentage holding of Yahoo’s outstanding shares as the company pursues its $5 billion buyback authorization,” Reuters reports. REUTERS

I.P.O./OFFERINGS Â'

Shares of Zoetis Surge on Debut  |  Shares of the Pfizer animal health spinoff Zoetis - the biggest initial public offering in the United States since Facebook’s last spring - made an impressive market entrance. DealBook Â'

Quadrant Private Equity Considers I.P.O. of Virtus Health  | 
WALL STREET JOURNAL

VENTURE CAPITAL Â'

Venture Capital Firms Adjust to Leaner Times  |  The Wall Street Journal reports: “Venture capital firms are taking stiff measures to survive a tough fund-raising environment and lackluster returns, including gutting their partnerships, slashing their fund sizes and refocusing their investment areas.” WALL STREET JOURNAL

F.T.C. Suggests Privacy Feaure for Mobile Apps  |  The New York Times reports: “In a strong move to protect the privacy of Americans as they use the Internet on their smartphones and tablets, the Federal Trade Commission on Friday said the mobile industry should include a do-not-track feature in software and apps and take other steps to safeguard personal information.” NEW YORK TIMES

Canadian Technology Campus Widens Its View  |  The New York Times reports: “After years of being a first-choice destination for University of Waterloo graduates and interns, BlackBerry is now a last resort. In its place, American technology giants including Google, Apple, Facebook and Microsoft have more than filled the hiring void.” NEW YORK TIMES

LEGAL/REGULATORY Â'

British Regulators May Get Power to Break Up Banks  |  George Osborne, Britain’s chancellor of the Exchequer, “on Monday will announce new powers for regulators to split up banks that flout rules designed to ring-fence retail banking from riskier investment-banking activity,” The Wall Street Journal reports. WALL STREET JOURNAL

BlackRock Sued by Pension Funds Over Fees  |  The giat asset manager BlackRock “is accused in a lawsuit by two pension funds of reaping ‘grossly excessive’ compensation from securities-lending returns associated with iShares,” Bloomberg News reports. BLOOMBERG NEWS

In Iceland, Prosecuting Bankers Proves Difficult  |  The New York Times reports: “In the four years since the Icelandic Parliament passed a law ordering the appointment of an unnamed special prosecutor to investigate those blamed for the country’s spectacular meltdown in 2008, only a handful of bankers have been convicted.” NEW YORK TIMES

Cleary Gottlieb Partner to Join Prosecutor’s Office  |  Joon Kim, a partner at Cleary Gottlieb Steen & Hamilton, is leaving the law firm to join the United States attorney’s office in Manhattan as chief counsel. DealBook Â'

Google Makes Proposal in European Antitrust Case  |  The New York Times reports: “European officials said on Friday that Google had submitted proposals aimed at ending a three-year antitrust case focused on its search service, but the offer did not prevent rivals from seeking to prolong its legal entanglements.” NEW YORK TIMES /span>

Some Urge Fed to Do Even More  |  The New York Times reports that “there is evidence that the Fed is not trying as hard as it could to stimulate growth: it is allowing inflation to fall well below the 2 percent pace it considers most healthy.” NEW YORK TIMES

Greenspan to Discuss Economic Forecasting in New Book  | 
WALL STREET JOURNAL

The Winners and Losers of Geithner’s Tenure  |  “Let’! s just sa! y the financial institutions that dominate the United States were rarely on the losing end in the Geithner years,” The New York Times columnist Gretchen Morgenson writes of the former Treasury secretary. NEW YORK TIMES